I have to say, initially when they introduced the performance fees, my initial reaction was more like yours and I was not happy.
However, having heard what was promised and then seen what changed at Forager (not focusing on the result), I am happy.
They've been able to hire some really good people, Steve has been able to step back and focus more on portfolio management and risk (this was really needed), allowing his really good recruits find the stocks for him. Don't underestimate the importance of Steve giving Gareth and Harvey the roles as co-portfolio managers.
In retrospect, they needed to grow the team to be more than just a Steve and Gareth show to make it work better. If you look at their FUM, there is no away they could have afforded to recruit the people they needed to strengthen their team and process, while earning just a fixed fee. The way the funds are structured, they need to pay out all their profits, meaning without a performance fee, their earnings remain roughly the same, even if they consistently outperform.
Harvey and Chloe have made some big contributions to the business, and if they did not have a performance fee, I am pretty sure they would have been poached 12 months ago, and it would have been back to the old Steve and Gareth show, which was okay, but not good enough. This industry is competitive, and stand out performers will get poached.
"After doing so, they then completely changed their style and start to swing for the fences buying increasingly more speculatively stocks." - I don't think they changed their 'style', towards picking stocks - they run a concentrated fund, so you will see some larger allocations towards high conviction stocks. If you don't like this, I think you have misunderstood what they're providing and have bought the wrong product.
Disclosure - I own shares in FOR and in the unlisted Forager International Fund.
FOR Price at posting:
$1.60 Sentiment: Buy Disclosure: Held
